Why Housing Costs are So High

The problems of inequality and urban displacement of working families in New York City is a microcosm of the problems that have transformed cities across the nation. New York has some unique advantages in responding to those challenges, which makes it an ideal place to begin reversing those trends, but the story is similar across urban America.

During the last century, suburbanization and predatory “urban renewal” were designed to displace lower-income communities from the core of the City; in fact, Manhattan had 700,000 more residents a century ago than it does today. That suburbanization was abetted by automobile and real estate industries with an interest in promoting sprawl, as well as political figures like Robert Moses who championed that movement for their own political interests. A 1929 Regional Planning Association blueprint laid out the vision of a city where people (as well as manufacturing) would be emptied from the urban core to be replaced by commercial buildings. 750,000 manufacturing jobs were also lost through the process that turned lower Manhattan into almost solely a commercial and financial center.

While the physical wrecking ball to residential neighborhoods was largely stopped by civic leaders like Jane Jacobs, the tools they developed to stop Moses and his allied suburbanization forces included new tools like zoning restrictions and historic preservation land marking, which would have their own unanticipated effect in undermining working class New York. The scarce supply of new housing meant soaring prices and the economic displacement of working class families replaced the physical displacement of the earlier part of the century. Between 1980 and 1999, Manhattan permitted an average of just 3,120 units per year; fewer new homes meant that between 1970 and 2000, the median price of a Manhattan housing unit increased by 284 percent in constant dollars.

Historic land marking also became a kind of neutron bomb zoning—preserving the buildings but driving out the working class communities that had once lived in the core of Manhattan out. People living in Manhattan’s historic districts are now almost 74% wealthier than those outside them. Three-quarters have college degrees compared to 54 percent of those outside and they are 20 percent more likely to be white. “The well-heeled denizens of historic districts convincing the Landmarks Preservation Commission to stop taller structures,” argues economist Edward Glaeser, “have become the urban equivalent of those restrictive suburbanites who want to mandate five-acre lot sizes in order to keep out the riffraff.” While construction costs are higher in New York City than other places, Glaeser estimates that condo costs are more than twice the physical cost of building them, driven largely by zoning, height limits and other political restrictions.

At the same time, under the pressure of higher energy prices and an increasing desire, especially among younger workers, to live in walkeable urban areas, the demand to live in urban areas like New York has increased. A recent study by CEOs for Cities found that there is a $3000 increase in price for every one-point increase in a home’s Walk Score – which rates a place’s walkability on a score from one to one hundred. So the new professional class inherits the old buildings once inhabited by working class New York and low-income workers inherit long, painful commutes—on average, the greater New York area has the longest commute in the country (35 minutes compared to the national average of 25).

Based on that demand and limited new supply of new housing in New York City, soaring housing prices have spilled out to northern Manhattan and the transit-accessible parts of Brooklyn, Queens and even parts of the Bronx, leading to gentrification that undermines remaining pockets of affordable housing and working class communities. There is a crisis of affordability for renters, both in New York City and across the nation. The professional class in the City continues to grow without the City keeping up with housing needs, thereby forcing the displacement of existing low-income renters.

The Bipartisan Policy Center has found that across the country, there is already a chronic shortage of rental housing for low-income families; there are over 10 million households living in extreme poverty and only 3.7 million rental housing units that are affordable for them. And it’s estimated that there is a need for at least 3 million new rental apartments in the next ten years to satisfy the expanding renter demand at all income levels. Without significant action, the housing situation for lower-income residents will just continue to worsen.

MORENYC- the Metropolitan Organization for the Real Expansion of New York City - works to expand the population and built environment of New York City in order to create jobs, lower housing costs and save the environment by encouraging more people to live in an urban environment of lower per capita energy use.

Related Research Resources

Argues that NIMBY-style support for downzonings can be reduced by creating an overall "budget" for available housing-as-of-right and create incentives for pro-development forces to lobby against down-zonings.